EXECUTIVE SUMMARY

The Economic Partnership Agreements (EPAs) as currently proposed by the European Union (EU) to the African, Caribbean and Pacific countries (ACPs) will prove extremely costly to the ACP economies. This is because, as documented by the note, ACPs have still high or substantial tariffs on imports from the world. If the EU products enter the ACP markets duty-free, the EU firms could price their products at a (much) higher price than the world price. ACP consumers—households and firms—will be hurt. ACP governments will lose tariff revenues. That said, there is little doubt that the WTO waiver on the current EU-ACP Agreements will expire by December 31, 2007—mostly for political reasons—and that the EU has no intention to table a Plan B. And alternatives, such as the GSP or the EBA, are unattractive for many ACPs on a purely economic basis, or from a political point of view. As a result, the ACPs should take an initiative—a ‘Plan A+’. The note explores what could be envisaged in the Doha Round context. The ACP could offer a better access to their markets to the non-EU WTO Members for being allowed by these countries to limit the forthcoming preferential liberalization towards the EU. An attractive, mutually beneficial, Doha-consistent ACP offer would consist in the ACPs cutting substantially their bound tariffs, and modestly their applied tariffs. As bound tariff cuts substantially reduce the current huge uncertainty in trading with the ACPs, they will generate new trade opportunities, more diversified ACP economies, and better regional trade agreements between the ACPs willing to do so. In short, they will deliver a much more progressive and balanced liberalization of the ACP economies than the one envisaged by the current EPAs. Such an offer is attractive to non-EU WTO Members—from China to the US. These countries are unlikely to be pleased by ACP markets being open to EU firms while remaining closed to their own firms. The note also explores ways for the ACP countries to conclude ‘Interim Agreements ’ with the EU in 2007—without preempting an attractive, Doha-consistent solution by hasty decisions taken in the EPA context. 1 ha l-